If there's one thing IBM doesn't need right now, it's another competitor jumping into the blade server market. Too bad. Networking giant Cisco Systems wants a bigger bite of the data center budget at exactly the same time that Hewlett-Packard has been ramping up its blade sales and Dell and Sun Microsystems are getting some traction, too.
Cisco is rumored to be getting ready to launch its "California" blade server product line, perhaps as early as next week, or in April if the company wants to wait for what it hopes to be better economic conditions. (That would also coincide with the Blade Systems Insight forum in Las Vegas, which is being held from April 19 through 21.)
Not much is known about the California product, but there has been plenty of speculation about the blades, how they integrate with Cisco's Nexus 5000 switches and Nexus 1000V virtual switches, which run inside VMware ESX Server virtual machine partitions. The other rumor is about the blade itself, supposedly a big, fat x64 with more memory than is traditionally put on a blade server, which would make it amenable to massive server consolidation through virtualization tools, presumably also from VMware.
The Cisco blade server and wraparound networking and virtualization software are all part of a larger set of announcements dubbed "Big Bang" by the company, which will presumably not be a big bang at all, but more like rolling thunder throughout 2009.
Despite the rumors that IBM and HP are pretty annoyed by Cisco moving in on the server racket, Cisco wants to grow and has little choice but to expand into new markets. And IBM, particularly because it has a relatively small but high-end x64 server business and has Cisco as a networking partner for its own BladeCenter blade chasses (in addition to others), is probably going to bump heads with Cisco a bit in the data center.
Unless, of course, Cisco does something IBM likes, such as embrace IBM's BladeCenter chassis and partner with Big Blue to peddle them. (There is no indication that this is the happening, or even rumors about such a potential partnership.)
The fact is, IBM has to reconcile itself to Cisco in a way that HP probably doesn't, because of its ProCurve switching business, and in a way that Dell, Sun, and the handful of blade server makers have to as well. And IBM knows it.
"Cisco is a leader in network equipment, and they continue to be a valued partner for blades," explains Alex Yost, vice president BladeCenter products at IBM. "Our job is to deliver an open platform, and offering Cisco switches is something we will do and I can't imagine that changing. Our clients want Cisco for Ethernet networking, and when our customers want something else, we will offer that."
Yost thinks that Cisco is, perhaps, in for a rude awakening with the California blades. "I've been in the x86 business for a long time, and I think it is going to be very difficult for Cisco to maintain the kinds of margins in this space that they are used to having in networking."
More than most x86 and x64 server makers, IBM has tried to stay in the midrange and high-end of the volume server market, where the margins are highest, and sells rack servers and tower servers in many cases to large enterprises that buy lots of gear at once or pumps onesies through its reseller channel, where the partner has to bear the cost of doing business. HP and Dell (and Fujitsu in Europe and Japan) push lots of boxes - many millions per year, collectively - to SMB shops, either directly or through channel partners and pump up their volumes (and lower their component costs) in this manner.
The advantage Cisco has with California is that it is already the poster boy for networking and has a vast channel that gets into data centers and customers who already know and trust its products. If anyone can pitch an integrated server-storage-switch hybrid solution, all pre-integrated and ready to run virtualized applications, it's Cisco.
If IBM had a networking business, the company could do much the same. HP could get its act together in the wake of the California launch and do much the same, since it already has switching software it can virtualize and virtual machine hypervisors of its own (for Itanium) or that it can partner to deliver (XenServer from Citrix Systems is the obvious choice).
This is exactly the double-whammy that IBM doesn't need in the blade space right now. From 2003 through 2005, IBM's market share in blades was in the range of 40 to 50 per cent, depending on the quarter, and HP, after a strong start in 2001 thanks to its Compaq acquisition, started slipping once IBM came on strong with its BladeCenters. But with the launch of the c-Class BladeSystems in 2006, HP got its act together and reclaimed its dominant position. The company shipped its 1 millionth blade server in August 2008, and its "Shorty" c3000 chassis for small businesses got the jump by many months on IBM's BladeCenter S chassis.
"With the c-Class chassis, HP got themselves and their partners to a blade-everything strategy," says Yost. "I give them high marks for execution, and they have had some features, such as hot swap disks, that they have used to block IBM sales. But our BladeCenter chasses have proved to be resilient, and we are making sure that in 2009, IBM gets the feature lead."
Yost says that the market share positions of IBM and HP in blades these days are closer to historical norms for the x86 and x64 market in general than in the 2003 through 2005 period, but IBM is clearly itching for a fight this year to try to get some market share back. New switches and connectivity adapters from partners as well as new "Nehalem" blades are going to be the key to that effort.
IBM is also counting on a steady uptake of the BladeCenter S chassis among SMB customers. More than 4,000 retail locations have BladeCenter S boxes running the 4860 retail operating system and their local operations, and the baby blade chassis is being pitched as a consolidation platform for AS/400 and iSeries shops that have a mix of OS/400 and Windows workloads who desperately need to modernize their servers and storage.
Educational institutions are also deploying BladeCenter S boxes as the back-end for virtual PC setups to cut down on PC hardware and support costs. ®